Business World, Dec. 310, 2004
Power distributor Manila Electric Company (Meralco) said that if the firms want to cut on power cost immediately, the "block" power scheme is more feasible than the "transitory open access" scheme that is being proposed by its industry group.
Semiconductor and electronics firms, as large power consumers, have been asking for reductions in electricity rates given that the industry they represent is the country's top export winner. Last year, the industry contributed 68% to the country's annual exports. The industry claims that electricity rates in the Philippines is one of the highest in the region.
The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI), which represents the 800-strong semiconductor and electronics players in the country, wants the immediate roll-out of the industry-specific power-saving "transitory open access" scheme, expecting to have it implemented as early as January or February next year.
But Meralco vice-president and head for utility economics Ivanna G. dela Peña told BusinessWorld Online in an interview that the "block" power scheme is in accord with the EPIRA law or the Electric Power Industry Restructuring Act. No. 9136. This is because the law also specifies that the mass implementation of the "open access" scheme should start only in July 2006.
While the "open access" scheme allows large power consumers to choose from a number of independent power producers (IPPs) for direct connection,without passing through the lines of power distributors, the "block" power scheme assigns only one IPP to cover a certain area through a discounted arrangement with a distributor such as Meralco.
Ms. dela Peña added that once implemented early next year, the "block" power scheme will be the second phase of the government's efforts to provide reduced power prices for industry locators inside the economic zones of the Philippine Economic Zone Authority (PEZA).
Released in May, a memorandum circular signed by PEZA, Energy Regulatory Commission (ERC), and the Department of Trade and Industry (DTI) has exempted ecozone firms from paying the two percent distribution franchise tax by requiring power distributors supplying electricity to special economic zones led by Meralco to register with PEZA.
Power distributors who registered are now counted as PEZA locators which can avail of the special 5% tax on gross income incentive.
In a separate interview, SEIPI vice-president Arthur R. Tan, who chairs the group's energy initiative committee, told BusinessWorld Online that the roll-out of the open access is heavily dependent on the response of Meralco.
Mr. Tan said the Department of Energy (DoE) has already considered their proposal to get the "transitory open electricity access" early next year, way ahead of the 2006 mass implementation.
Semiconductor and electronics players in the country are as the biggest consumers of electricity in the manufacturing sector. SEIPI estimates that the "open access" scheme will lower the cost of electricity by at least one peso per kilowatt-hour.
"Everybody is agreeing, the issue is in the implementation. How Meralco is going to do it because they are the distribution, we got all the generators all lined up. Truly it is Meralco that is holding that up. They are trying to figure out how they are able to implement this without having discriminatory effects with other users. I think that is more the problem," said Mr. Tan.
According to a SEIPI study, electric power costs here make up as high as 41% of the total operating costs of some firms. For other companies, power cost is seen to eat 20% to 30% of their total operating cost. In other countries electric power cost normally makes up for only about 10% of the total operating budget.
The study showed that the cost of electricity per kilowatt-hour is about $.09 in the Philippines, the highest in the five countries composed of Philippines, Thailand, Malaysia, China and Indonesia. In Indonesia, the cost is only $.03 per kilowatt-hour. Electric costs in Thailand, Malaysia and China are $ .06, $.05 and $.03 respectively.
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Business World, Thursday, December 30, 2004
Energy officials and members of the Joint Congressional Power Commission (JCPC) have agreed to conduct monthly consultations on the sale of state-owned generation and transmission assets.
National Transmission Corporation (Transco) President Alan T. Ortiz said "There should be more exchange of information from the Energy family. We agreed on a once a month schedule of meeting," he said.
He said the JCPC will not approve or reject any privatization initiative since its task is to oversee the implementation of the Electric Power Industry Reform Act (EPIRA).
Rep. Alipio Cirilo V. Badelles, head of the House of Representatives JCPC panel, has criticized the Energy department and the Power Sector Assets and Liabilities Management Corp. (PSALM) for failing to consult the commission.
PSALM is the government firm mandated by law to oversee the privatization of generation and transmission assets owned by National Power Corp.
Last month, the JCPC criticized a Justice department opinion allowing PSALM to amend the privatization plan for Transco without consulting the JCPC.
The Justice department opined that there is no need for PSALM to secure JCPC endorsement, which Mr. Badelles said renders the oversight function of the JCPC useless.
The commission also asked the Department of Energy to explain why the oversight body was not consulted when the schedule for the sale of Napocor's power plants was revised.
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Business World, Friday, January 14, 2005
Debt-saddled National Power Corp. (Napocor) will not have to borrow this year should the sale of its generation and transmission assets push through, a Power Sector Assets and Liabilities Management Corp. (PSALM) official yesterday said.
"If we realize the proceeds from the privatization of the generation companies and National Transmission Corp. (Transco), we can have cash surplus. There would be no need to borrow for this year. It depends on the cash flow," the PSALM official, who refused to be named, said.
Transco, a spin-off firm tasked to operate the country's high-voltage transmission network, is valued around $2 billion. The government also hopes to generate some $2 billion from the power plant sales.
"If we are able to privatize both, we won't need to borrow. We can actually base it from the 2005 asset sales. The question now is when can we actually seal these transactions," the official said.
PSALM is the government firm mandated by Republic Act 9136 or the Electric Power Industry Reform Act of 2001 to dispose of all of Napocor's generation, transmission and other related assets.
The PSALM official also said that if the Energy Regulatory Commission (ERC) grants Napocor a full P1.87 per kilowatt-hour generation charge increase, Napocor can expect an improvement of at least P68 billion in cash flow for 2005.
"Since we're getting half, the expected improvement is P34 billion. That's how much we will reduce [our] deficit," the official said.
PSALM earlier said it is optimistic it can auction off 70% of the ailing firm's power plants by end-2005.
The government recently sold the 600-MW Masinloc coal-red power plant to YNN Pacific Consortium, Inc. for $561.7 million. It has also successfully privatized five small power plants since March: the 1.2-MW Loboc hydroelectric plant in Bohol which was sold to Santa Clara International Corp. for $1.42 million; 0.4-MW Cawayan hydroelectric plant in Sorsogon to Sorsogon II Electric Cooperative, Inc. for $410,410; 3.5-MW Talomo hydroelectric plant in Davao to Aboitiz-owned Hydro Electric Development Corp. for $1.37 million; 1.6-MW Agusan River mini-hydroelectric plant which was bought by First Generation Holdings Corp. for $1.5 million; and the 1.8-MW Barit hydroelectric plant in Camarines Sur which was sold to lawyer Ramon I. Constancio for $480,000. -- Bernardette S. Sto. Domingo
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Business World, Friday, January 14, 2005
Lopez-led Manila Electric Co. (Meralco) is preparing to pay off P2.28 billion in overcharges to some 103,425 small commercial and industrial customers starting next month.
Meralco, the largest power distributor in Luzon, said it had received an order from the Energy Regulatory Commission (ERC) to implement Phase IV of its court-ordered refund.
Leo Mabale, Meralco senior assistant vice president and refund management task force head, said the ERC wants the refund credited to future billings over a specified period of 18 months starting January.
"Although we recognize and adhere to ERC's order, we need to inform the commission on the difficulties of starting the implementation this month. We received the order only on January 6 and we cannot implement it midway in the January billing cycle," Mr. Mabale said.
He said the Bureau of Internal Revenue (BIR) had notified Meralco that it intended to tax the refund of customers under Phase IV and designate the power firm as its withholding agent.
"We hope to clarify with the BIR and ERC all of these matters including the tax rules and mechanics at the soonest possible time so we can hopefully implement the refund by February at the earliest," Mr. Mabale said.
He also said Meralco was also directed to submit to the ERC the details of its refund proposal and a refund implementation status.
Phase IV-A of the refund benefits small commercial and industrial customers, government hospitals and metered streetlight customers with contracted demand of less than 40 kilowatt-hours. Flat streetlight customers are also included.
By December 2004, Mr. Mabale said Meralco had completed processing refunds for active and terminated residential/general service customers, which covers 5.1 million electricity users. These represent 98% of customers entitled to a refund.
The amount processed for refund stands at P11.6 billion or 38% of the total refundable amount, Mr. Mabale said.
Meralco is repaying customers in line with a Supreme Court order issued in April 2003 to refund excess charges dating back to 1994. The refund is estimated to total some P30 billion
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Business World, january 12, 2005
The Energy Regulatory Commission (ERC) has approved a new formula for electric utilities like Manila Electric Company to compute electricity prices.
The new rate-setting methodology will base electricity prices on a utility's efficiency, as determined by its performance, and no longer on the value of its assets or its total investment in delivering electricity.
With the Distribution Wheeling Rates Guidelines (DWRG), utilities like Meralco can choose not to use the Return on Rate Base (RORB) methodology, ERC said in a statement.
"The RORB methodology allows a distribution utility to set rates or charges for regulated activities to recover costs plus a reasonable rate of return on rate base. DWRG is a performance-based rate-setting approach that employs incentives to induce cost-cutting that is expected to result in lower electricity rates in the long term," said ERC Chairman Rodolfo B. Albano, Jr.
The shift to performance-based pricing is expected to compel utilities to be efficient, since their profits will depend on their efficiency gains.
Ivanna G. dela Peña, Meralco vice-president for utility economics, said the change in methodology was timely.
"It gives distribution utilities the flexibility. We still have to meet and asses the implication. Right now, we're looking at the guidelines, schedules. In due time, we will come to a decision whether we want to opt in," she said.
ERC said it adopted DWRG as an alternative rate-setting formula under Republic Act No. 9136 or the Electric Power Industry Reform Act.
With RORB, regulatory reviews use straight-forward accounting everytime a utility applies for a rate increase.
BWRG will require fewer but more detailed reviews of forecasts and performance, ERC said.
"It provides incentives to distribution utilities to make efficient investments and to lower costs by improving efficiency of utility operations and ultimately bring about long-term benefits to consumers in terms of providing more affordable electricity rates and greater quality and reliable electric service," Mr. Albano said.
ERC said power rates under DWRG would be controlled through an average price cap mechanism -- a limit on the average revenue per unit a utility can earn in a period.
The maximum average price (MAP) a utiliy can charge should cover all relevant price measures -- change in weighted index, correction factor for over or under recovery of revenue in the previous year, tax adjustment for over or under recovery of corporate income tax in the previous year, and efficiency factor for both operating and capital expenses.
Initial maximum average price is based on specific historical period data, and should be approved by ERC.
The regulatory period will be four years, with one regulatory reset prior to the start of each period. There will be consultations and price controls. For new utilities, initial pricing will take into account inflation.
"Distribution firms will enter the performance-based rate scheme through DWRG on a first-come, first-in basis in any one of the scheduled entry points as defined in the timelines for the five entry points. They must submit a letter of intent to join a specific entry point," ERC said.
In May 2003, ERC already ordered performance-based rate-setting for transmission charges. -- Bernardette S. Sto. Domingo
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Business World, Tuesday, January 11, 2005
Malaysian firm Petronas yesterday inked service contract no. 47 with the Department of Energy (DoE) and the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) to explore petroleum reserves in offshore Mindoro.
The firm, through its subsidiary Petronas Carigali Overseas Sdn. Bhd., will invest some $12.5 million for the project within seven years.
With 14,667 square kilometers, the block covers the offshore area south of Mindoro island and west of Panay island.
"This new agreement has long been in the waiting. Now that the road has been paved clear, we look forward to the drilling of one of the most attractive exploration areas in the country," Energy Secretary Vincent S. Perez, Jr. said.
President Gloria Macapagal-Arroyo welcomes Tan Sri Dato Sri Mohd Hassan bin Marican, Petronas president and chief executive officer, to the Malacañang presidential palace, January 10.
This is the third petroleum service contact signed in one month after the Supreme Court last year declared the Philippine Mining Act constitutional, Mr. Perez said.
Under the agreement, Petronas and PNOC-EC will commit to drill one exploratory well in the area with an option to either drill another one or acquire new seismic data. The contract commitment will also include geological and geophysical studies and a possible seismic survey.
The work program will be completed in the first two years, after which the contractors can decide whether to proceed with the subsequent phases of the exploration period.
Petronas has an 80% participating interest, while PNOC-EC holds the remaining 20%.
The contract also stated that the seven-year term is extendible for three years upon justification, while the 25-year development and production period is renewable for a series of five-year periods, but shall not exceed a total of 15 years.
Service contract no. 47, which is the former geophysical survey and exploration contract no. 100 (GSEC 100), is one of the most attractive exploration acreage, situated in the same geologic region as northwest Palawan, the Energy department said.
As operator of the former GSEC 100 license, DoE said PNOC-EC already identified two drillable prospects -- the Tablas prospect, situated between the island of Tablas and Mindoro and the Cherry prospect, located some 12 kilometers southeast of Maniguin-2 well.
High-quality petroleum source rocks, with organic richness and excellent generative capability have been penetrated in the Maniguin-2 well, which flowed more than 300 barrels of oil per day during open hole tests, the Energy department said.
Along the Tablas strait, gas seepage, oil slick on the water surface, and oil recovered from seabed cores all support the observation that an active petroleum system exists in the area, it added.
Mr. Perez said Petronas had been involved in previous efforts in the Cotabato Basin in Mindanao in 1995.
The Energy department has awarded service contract no. 45 to China's South Sea Petroleum Holdings Limited Service to explore oil and gas in the Agusan-Davao Basin, and service contract no. 46 to Japan Petroleum Exploration Co. Ltd. for petroleum exploration over the Ta§on strait in Negros Occidental.
Two other petroleum service contracts were awarded last year to Singapore-based firm Gas to Grid Pte. Ltd. and British firm Premier Oil Philippines B. V. to explore oil and gas in the central Cebu area and over the Ragay Gulf in the Bicol region and parts of Bondoc Peninsula in Quezon, respectively. -- Bernardette S. Sto. Domingo
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Business World, Tuesday, January 11, 2005
Foreign firms which have expressed interest to explore for oil in the Malampaya natural gas field are expected to firm up their offers by end-February.
Philippine National Oil Co. (PNOC) President Eduardo V. Mañalac yesterday said his firm is continuously talking to potential developers of the oil reserves, abandoned as not viable by Malampaya project consortium.
"There were many companies who acquired data from us to study them. They are expected to give their decision whether to develop it by end of next month," Mr. Mañalac said. "Hopefully by first quarter we'll have clearer picture whether oil reserves will be developed or not,"
Energy Secretary Vincent S. Perez, Jr., has said three foreign firms are keen on exploring for oil in Malampaya.
The Malampaya project is a joint venture of Shell Philippines Exploration BV (Spex), Chevron Texaco and the government through PNOC, which has a 10% stake in it. The PNOC chief said Spex has assured the government it will cooperate with anyone who wants to develop the reserves.
Mr. Mañalac earlier said that PNOC decided to hold off reviewing the viability of the abandoned reserves and instead aggressively pursue negotiations with a potential investor. PNOC-Exploration Corp. was tasked to handle the talks.
He said the government wants to find a way to exploit the Malampaya reserves, estimated to be around 25 million to 30 million barrels, and that it is looking to pump oil by 2006.
The government said the Malampaya consortium abandoned the oil leg because the reserves were small. SPEX's and Chevron's contract allows it to abandon the project upon its discretion, especially if they no longer find it to be financially beneficial.
The Malampaya consortium is undertaking a $4.5-billion gas-to-power project involving natural gas discovered off northwest Palawan. Located in the South China Sea, Malampaya is estimated to contain some 2.6 trillion cubic feet of natural gas.
It is the largest natural gas development project in Philippine history and is one of the largest foreign investments in the country.
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Business World, Tuesday, January 11, 2005
Napocor debt transfer still awaiting creditor's approval
A visiting Japanese minister has been asked to help secure Japan Bank for International Cooperation (JBIC) consent for the transfer of National Power Corp. (Napocor) debts to Power Sector Assets and Liabilities Management Corp. (PSALM).
Energy Sec. Vincent S. Perez, Jr. said he emphasized the "urgency of the consent" to Japanese Finance Minister Sadakazu Tanigaki, whom he met yesterday to discuss the progress of Philippine power sector reforms.
"[Japan] took note of the strenuous efforts for power reforms in the country and that he [Mr. Tanigaki] will personally follow-up the consent from JBIC," Mr. Perez told reporters.
"We discussed the progress of power reforms and I think he was impressed with the progress made so far ... We also asked them about the JBIC consent for the debts," Mr. Perez said.
JBIC, one of Napocor's major creditors along with the Asian Development Bank and the World Bank, has to approve the transfer of Napocor's debts under the Electric Power Industry Reform Act of 2001 (EPIRA).
PSALM was given the mandate, under EPIRA, to dispose of all of Napocor's assets, which include 35 power plants and non-power and real estate properties.
The World Bank and JBIC last year gave the go-signal to transfer the first five power plants privatized by PSALM to winning bidders. These assets are the 3.5 megawatt (MW) Talomo hydroelectric plant (HEP) in Davao City; 1.6-MW Agusan HEP in Manolo Fortich, Bukidnon; 1.8-MW Barit HEP in Buhi, Camarines Sur; 0.4-MW Cawayan HEP in Sorsogon City, Sorsogon; and the 1.2-MW Loboc HEP in Bohol.
PSALM recently sold one of Napocor's largest assets, the 600-MW Masinloc coal-fired power plant in Zambales, to YNN Pacific Consortium for $561.7 million.
PSALM has 270 days from the award and effectivity of the sale agreement to obtain the consent of international creditors of Napocor for the transfer of the Masinloc plant.
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Business World, Saturday, January 8, 2005
DAVAO CITY -- A business leader in Mindanao is wary over how the government is addressing the power problem in the island, saying projects that have been implemented will not solve an impending power supply shortage.
"We are a bit wary, we need more investments in Mindanao on [the] power industry," said Romeo Serra, Mindanao Business Council vice-chairman.
Mr. Serra explained that while the construction of the 200-megawatt coal-powered project is going on in Northern Mindanao, its operation will only start next year, while the impending power problem is seen to start this year. "We are happy with the implementation of the project, but that is not enough.
The government should look for more sources so that it can address the long-time requirements of Mindanao," he added.
But Mr. Serra said Mindanao's power requirements were projected to reach critical level this year, particularly if the El Niño, or the dry spell, hits the island.
Mindanao is relying mainly on hydroelectric power plants in the Lanao region, although there are power barges and small independent power producers all over the island.
Aside from setting up the power plants, the government should also fast-track the setting up of redundant transmission lines in order that blackouts caused by transmission line tripping be minimized, he added.
Earlier, an official of the National Transmission Corp. (Transco) admitted that there were problems in the transmission lines within Mindanao that caused tripping resulting in blackouts.
A Transco paper also said that Southern Mindanao's power consumption has been increasing between 7% to 8% a year and that its peak demand sometimes reaches up to 495 megawatts, or nearly half the 1,074 average daily consumption for the entire island.
Mindanao is producing about 1,336 megawatts a day, mainly coming from its aging hydroelectric plants and power barges.
Mr. Serra said that instead of setting up the power plants elsewhere, the government should concentrate on setting up these plants in Southern Mindanao because it is the main consumer of power.
Mr. Serra said the government should immediately look for other alternative power sources and implement projects that are within its priorities, like the coal-powered plant being planned in Sultan Kudarat.
"Otherwise, we will see a bigger problem if the government fails to address this," he added. -- Carmelito Q. Francisco
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Business World, January 6, 2005
By CARINA I. RONCESVALLES, Reporter
Senators yesterday slammed government officials running the energy development portfolio for allegedly not learning from previous transactions that to date continue to hound the state's fiscal health.
In a privilege speech, Sen. Joker P. Arroyo assailed the National Power Corp. (Napocor) and the Power Sector Assets and Liabilities Management Corp. (PSALM) for their "unabated treachery" in continually exposing the government to financial difficulties, more recently with the award of the privatization contract for the Masinloc power plant.
The contract, he said, exposed the government to more financial woes even as it grapples with the scandal arising from another contract for the Terminal 3 of the Ninoy Aquino International Airport (NAIA-3).
Sen. Miriam Defensor Santiago broached the possibility of citing PSALM officials for contempt for awarding a major privatization contract after they were ordered not to do so by Joint Congressional Power Commission (JCPC)
She was referring to the recent decision of PSALM to award the Masinloc power generating plant contract to YNN Pacific Consortium. Inc.
By far, Masinloc is the biggest power plant privatization contract completed by PSALM since its inception and yet, Mr. Arroyo said the winning bidder had a paid-in capital of less than P1 million.
The PSALM has stressed that the government is protected in the transaction via a security bid of $9 million that can be forfeited in favor of the government in the event YNN fails to deliver on its commitment.
This, however, could not make up for transacting with "fly-by-night undercapitalized companies," Mr. Arroyo stressed.
"The bid requirements do not contain specific requirements or criteria on who could bid," he said. "In short, there is no solid basis for evaluating the 'track record' of prospective bidders. That is how YNN Pacific Consortium, Inc., which you cannot contact because it has no registered telephone, won the bid."
Mr. Arroyo hit Napocor and PSALM for the "wicked, wicked ways" of their financial transactions despite the fresh lesson of the Philippine International Air Terminals Co. (PIATCo) controversy.
"The scandal that is PIATCo happened partly because it was undercapitalized, so it had to bring in [German airport developer] Fraport, which contributed 60% of the cost of the terminal but holds only 30% equity on paper, resulting in charges of dummying," the senator said.
The government, did not lack any reference for problematic transactions, he added, citing the National Steel Corp. which was "sold to an undercapitalized Malaysian firm."
CONTEMPT
In tackling the possibility of citing PSALM officials for contempt, Ms. Santiago said: "They gave a notice of award during the holidays. What was big rush when people are concerned when buying gifts? I don't' understand why these particular officials of the government, after receiving proper order from properly and constitutionally established oversight committee should violate it so abruptly."
Just before issuing the notice of award, PSALM officials were ordered by representatives of both houses of Congress not to do so.
She said direct contempt was the necessary "protective measure to defend the power and sovereignty of the legislative branch of the republic to these anonymous officials."
Finance Sec. and PSALM chairwoman Juanita P. Amatong has announced that the bid was awarded to YNN last Dec. 23. The firm's price offer topped that of First Generation Holdings Corp., a company controlled by the Lopez group, the majority shareholder of leading power distributor Manila Electric Co.
"They have no power to turn against an explicit order that was agreed upon unanimously by a bicameral commission. This being so, I propose that we must teach people a lesson that bicameral commission composed of members of both houses of Congress can only be disregarded at extreme chances. They should not act as if they own the energy sector of this country. They might be technical experts on these matters but that does not immediately validate their good faith," Ms. Santiago said.
Moreover, Mr. Arroyo noted that the asset should have been sold on cash basis and not on deferred basis given the volatile fiscal position of the national government.
"It is rather unfair that Malacañang should badger Congress to do the dirty and unpopular job of raising more taxes yet allows the scandal-ridden Napocor and its related agencies, PSALM and Transco (National Transmission Corp.), and its high priest, the Secretary of Energy (Vincent S. Perez), to under perform and worst, continue with its bad practices of the past that has given the country and people so much financial pain," Mr. Arroyo said.
Mr. Arroyo's privilege speech was referred to the Senate committee on energy for investigation.
Citing documents from the Securities and Exchange Commission (SEC), Mr. Arroyo earlier said YNN Pacific Consortium Inc. had no track record in the energy sector since it was incorporated only on July 19, 2004 or five months before the contract was awarded by PSALM.
The General Information Sheet filed by YNN Pacific Consortium Inc. with the SEC last Sept. 13 showed that it has an office building at 1122 Perez St., Paco, Manila but it has no telephone number and corporate tax identification number. Its incorporators include Sunny T. Sun, Mariano L. Tan, Lawrence The, Joseph Ty and Edison Ty.
Amidst criticisms to the asset sale, PSALM has stood firm behind the Australian firm.
During the recent Senate hearing on Napocor privatization, PSALM president Raphael Lotilla noted that it has letter of credit worth P500 million or $9 million which will stand even if the Australian company will back out from the deal.
He added that the first major asset sale of debt-saddled Napocor will yield interest in other assets of the state-run utility. PSALM is mandated by law to carry out the sale of Napocor's generation and transmission assets and it has 270 days from the award and effectivity of the sale agreement to obtain the consent of the international creditors of Napocor to the sale and transfer of the Masinloc plant. The creditors include the Asian Development Bank, World Bank and Japan Bank for International Cooperation.
Upon the grant of the creditors' consent, YNN is expected to pay up front 40% of $561 million while the balance of 60% will be paid in seven years at 12% annual interest.
Mr. Lotilla further expressed optimism that they will be able to sell 70% of Napocor's power plants by end-2005. It expects to make $4 billion to $5 billion from the sale of power plants.
Prior to the Masinloc contract, PSALM had privatized five small power plants since March: Loboc hydroelectric plant in Bohol, which was sold to Santa Clara International Corp. for $1.42 million; Cawayan hydroelectric plant in Sorsogon, to Sorsogon II Electric Cooperative, Inc. for $410,410; Talomo hydroelectric plant in Davao, to Aboitiz-owned Hydro Electric Development Corp. for $1.37 million; Agusan River mini-hydroelectric plant, to First Generation Holdings Corp. for $1.5 million; and Barit hydroelectric plant in Camarines Sur, to lawyer Ramon I. Constancio for $480,000.
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Business World, January 6, 2005
The Department of Energy (DoE) yesterday gave assurances that local fuel prices will not increase despite the implementation of a 5% import duty on crude and all finished products beginning this month.
An oil price rollback may even be possible in the coming weeks, Energy Sec. Vincent S. Perez, Jr. said.
"World prices have gone down and if they remain stable, we can expect a rollback in the coming weeks especially in gasoline. The good news is prices will not rise because of the import tariff. There's no pass on, there's no effect at the moment," he told reporters.
Citing DoE computations, Mr. Perez said the additional tariff, which is equivalent to an average 36 to 38 centavos per liter, will hardly be felt by consumers given the softening of world oil prices.
"I hope local oil companies will be sensitive to our people's aspiration to enjoy some relief from last year's battering. I am urging them not to foot-drag in reflecting the global price trend in the local pump price," he said.
DoE data showed that the average price of Dubai crude fell to $34.20 per barrel in December from $34.87 in November. Regional prices for unleaded gasoline also dropped to $44.81 from $52.45, while imported diesel also fell to $51.33 from $56.82.
Imported crude and all refined petroleum products except the socially-sensitive liquefied petroleum gas (LPG) are now levied a 5% import duty from 3% previously. Mr. Perez said the government expects to raise additional revenues of about P5.5 billion annually from the additional tariff.
Meanwhile, the Energy chief said oil prices are likely to remain at current levels over the next three months.
"Existing oil inventories built up in major international oil markets will likely keep prices at present levels in the first few months of the year although the so-called 'oil premium' brought about by the attacks on major oil infrastructures in the Middle East as well as geopolitical tensions involving oil producing countries will continue to take effect," he said.
Citing energy analysts' forecasts worldwide, the DoE said international oil prices are likely to remain above $30 per barrel for Dubai crude, Asia's benchmark, in the first five months of 2005.
New York based-PIRA Energy Group said Dubai crude in January will average up to $36 per barrel to $33 in May.
Commercial crude inventories in major oil markets are at multi-year highs, at about 27 million barrels beginning the fourth quarter last year, the DoE said.
It added that according to PIRA Energy, crude stock buildup stands at 49 million barrels, the largest since 1997.
Combined with a reported slowdown in economic growth in countries such as China and Japan, analysts said the sharp increase in prices seen in 2004 is unlikely to take place, the Energy department said.
Last year, world oil prices reached all-time highs, mainly due to very low oil inventories coupled with a surge in oil consumption in developing Asia, instability in Iraq and in other oil producing countries, bankruptcy problems in Russian oil firm Yukos and the occurrence of natural calamities like hurricane Ivan in the Gulf of Mexico.
Dubai crude soared by 25% to an average $33.63 per barrel last year from $26.79 in 2003, hitting a record high of $41.26 in August 20 last year.
However, the DoE quoted PIRA Energy as stating that the downward pressure on crude prices will be limited due to continuing threats of terrorism against oil installations, uncertainty on the sustainability of Yukos exports, and the prevailing high demand of middle distillates (kerosene, aviation turbo, gas oil and diesel) in Europe and the United States. -- Bernardette S. Sto. Domingo
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Business World, Wednesday, January 5, 2005
By Ma. ELISA P. OSORIO and BERNARDETTE S. STO. DOMINGO, Reporters
A consumer group is questioning in court regulators' approvals late last year of an almost P1 per kilowatthour increase in the electricity price of state-run National Power Corporation (Napocor).
National Association of Electricity Consumers for Reforms (Nasecore) asked the Court of Appeals to void the September and November decisions of the Energy Regulatory Commission because the rate rise was unjustified.
It claimed that Napocor's method of computing the price increase of 97.98 centavos per kilowatthour did not meet international standards.
"Using the average US dollar versus Philippine peso exchange rate as the method of asset valuation is not sanctioned or approved by the International Valuation Standards Committee," the 14-page petition said.
Nasecor said Napocor should first prove that this valuation method was internationally sanctioned.
The Energy Regulatory Commission said earlier the foreign exchange indexation methodolog used by Napocor was "acceptable and reasonable"
Foreign exchange indexation is not among the alternative valuation methods endorsed by the International Valuation Standards Committee, which are cost approach, sales comparison approach, and income capitalization approach.
Nasecore also opposed the Time-of Use Pricing scheme pushed by Napocor, which it claimed did not benefit consumers that could not shift power demand to off-peak periods.
With the scheme, electricity prices during peak periods are extremely high compared to off-peak periods.
Nasecore noted that even regulators themselves earlier rejected the scheme because it was "not likely to replicate the portfolio available to customers in a competitive environment."
But energy regulators laters reversed themselves on the issue.
Nasecore also wants power companies to charge the true cost of generated electricity before asking for any rate increase.
RULES
At the same time, the Energy Regulatory Commission (ERC) is now preparing rules that may allow electric companies to automatically charge their customers more everytime the cost of "transmission" or delivery of electricity will go up.
However, the additional charge will not necessarily go to the electric companies themselves but to state-run National Transmission Corp. (Transco), the government-owned company that owns and operates transmission towers and lines nationwide that deliver electricity from one area to another.
ERC Chairman Rodolfo B. Albano said his office was just waiting for comments and suggestions from the industry. Public consultation will follow.
"We have posted it [proposal] on the website to get more information. After public hearing and consultation, we will issue the guidelines," he told BusinessWorld.
In separate interviews, industry sources said they urged regulators to cosider the transmission rate adjustment mechanism or TRAM.
"We heard ERCis already finalizing the guidelines," one source said.
TRAM is similar to the defunct generation rate adjustment mechanism or GRAM, which had allowed electric utilities to recover fluctuations in fuel prices and in the cost of electricity bought from state-run National Power Corp. as well as private generators.
An industry source noted there was no mechanism that allowed for the recovery of changes in transmission prices.
He said the National Transmission Corp. fixed transmission rates based on a utility's load factor -- its average load as a percentage of its peak load. But load factor is not within a utility's control, and if it goes down or up, under-recovery or over-recovery ocurrs.
"There must be a way to correct that. That is something the regulators completely forgot. That is their first flaw. Also rate levels can go up and if they do, there is no mechanism for recovery of costs. ERC should be the one to fix this," the source added.
Last October ERC scrapped GRAM and allowed utilities to automatically raise prices without prior approval, to reflect fluctuations in generation costs due to movements in fuel prices and the exchange rate.
Mr. Albano had said that without GRAM, National Power Corp. and distribution utilities could automatically raise prices but would have to justify them. "Ten days before every month, they should have estimates of power costs. They should file a report before their implementation, but they don't need to wait for approval from the ERC," Mr. Albano had said.
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Business World, Wednesday, January 5, 2005
The government has postponed the the sale of two state-owned power plants by a month to allow it to concentrate on the $2-billion privatization of the national power grid, officials said on Tuesday.
Froilan Tampinco, vice-president of the Power Sector Assets and Liabilities Management Corp., said the government now aimed to hold the bidding for a decommissioned 200-megawatt plant in Manila on February 18 instead of in January.
A 54-megawatt plant on Cebu island will be auctioned in March instead of February.
"We have not scheduled any sale of generating assets this month. We want to concentrate on Transco," Tampinco said, referring to the National Transmission Corp.
Transco was spun off from debt-laden National Power Corporation (Napocor) in 2002 to operate the state firm's transmission business.
The government missed its end-2004 target to award a 25-year concession contract to operate the grid and has extended the deadline to the first quarter this year.
The Philippines aims to privatize Transco and dozens of Napocor power plants to cut its huge budget deficit and attract private investors to the creaking power sector.
The privatization, forecast by Manila to raise up to $5 billion, is also seen as a litmus test for the government's pledge to reform the economy.
Napocor has debts of about $23 billion, or nearly a third of the nation's gross domestic product.
Last month, the government said it would absorb by end-December about P200 billion worth of bonds issued by Napocor to speed up the firm's privatization.
The Philippines sold its first major power plant to an Australian-Filipino group in December for a higher-than-expected $561.74 million.
The government also raised $5.16 million from the sale of five small hydropower plants in 2004. -- Reuters
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Business World, Tuesday, January 4, 2005
Lawmakers are currently studying three proposed laws which seek to promote and develop the country's renewable energy sources.
Rep. Alipio V. Badelles, chairman of the House of Representatives panel of the Joint Congressional Power Commission (JCPC), said the measures aim to help the county achieve energy independence and self-sufficiency.
Being considered are bills on new and renewable energy, mandatory ethanol blending, and natural gas.
Mr. Badelles said the high cost of electricity in the country can be attributed to the fact that 46% of the fuels used for generating electricity comprises imported coal and oil.
"The cost of generating electricity will be reckoned in terms of the volatility of the dollar-peso exchange rate ... additionally, we are disadvantaged because we are competing with the economies of China and India that are importing energy fuel in huge quantities, paying premium prices to insure stable supply," he said.
He said Congress has been attempting to make into law the promotion and development of alternative energy sources, with the filing of the first bill, titled "An Act to Strengthen the National Program for the Development and Promotion of Non-Conventional Energy Systems," in 1990.
Mr. Badelles said he has authored House Bill 1068, or "An Act to Promote the Development, Utilization and Commercialization of Renewable Energy Sources", which aims to set an institutional framework and infrastructure to encourage the commercial application and development of indigenous energy resources.
He said there is also a need to rationalize the tax system between imported fuel and indigenous fuel, adding that a bill on mandatory ethanol blending will not only benefit the ailing sugar industry but also help bring fuel prices.
Mr. Badelles also expressed optimism that a bill on natural gas will finally pass muster since it was already approved during the last Congress.
Energy Sec. Vincent S. Perez, Jr. has said the country is stepping up oil and gas exploration in a bid to maximize the use domestic energy sources. The government is also pursuing initiatives to explore and develop the country's renewable energy sources. Last year, the state-run Development Bank of the Philippines said it has set aside some P50 billion in loans to finance renewable energy projects.
"We need to discover another Malampaya if we want to achieve 60% self-sufficiency in energy by 2010," Mr. Perez said.
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Business World, Monday, January 03, 2005
State-run National Transmission Corp. (Transco) will award this month the contract to evaluate its transmission assets in preparation for privatization. Transco President and Chief Executive Alan T. Ortiz told reporters last week the final list of bidders include foreign appraisers.
"We can name the financial adviser by January. There were three foreign firms that were left," he said. The government is set to privatize the operations of Transco, the spin-off company which handles the transmission functions of the National Power Corp. (Napocor).
Last year, Transco announced it is looking for a third party to evaluate its assets which were earlier appraised to be as high as $3 billion from $2 billion in 1996.
The contract involves appraising Transco's transmission assets to assess how much they are worth in preparation for privatization. The Power Sector Assets and Liabilities Management Corp. (PSALM) last week announced it expects to privatize Transco by the first quarter of next year despite earlier targeting its sale before yearend. PSALM earlier said it was reviewing whether the yearend target for the privatization of Transco is still doable.
PSALM is the government agency tasked to privatize state-owned generation, transmission and related assets as mandated by the Electric Power Industry Reform Act (EPIRA).
PSALM President Raphael Perpetuo M. Lotilla said some four to five groups remain keen to operate the country's high voltage transmission system.
Mr. Lotilla said PSALM is currently attending to other issues such as the government's absorption of Napocor's PhP200 million debts by December 31, 2004. The government expects to raise $2 billion from the Transco sale. The amount will be used to pay off part of Napocor's debts.
The winning concessionaire will be allowed to operate Transco for 25 years, renewable for another 25 subject to performance conditions. The government will require at least 25% of the enterprise value of the business as upfront payment upon closing of the transaction.
Under EPIRA, Transco's operations will be given to the private sector. However, ownership of the company and its transmission assets will remain with the government.
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